Revenue to probe taxpayers' clients

Tax experts fear thousands of individuals will pop up on the Revenue's radar if it gets its way and forces businesses to disclose information on people that trade with them.



Although the taxman already has powers to obtain specific details on a group of taxpayers, it says these date back to1970 and fail to factor in new capabilities via IT.



Arguing for a single provision for all taxes except inheritance tax, HMRC proposes that its information powers should apply to 'third parties involved' with the taxpayer.



"For some taxes, parties other than the taxpayer hold the key to documents to check the right amount of tax has been paid," the Revenue said in a consultation document.



"HMRC proposes to apply information powers to these involved third parties in a similar way to first party information powers in Finance Act 2008."



In some instances, an involved third party could be a person who makes arrangements for people to enter in contracts, HMRC said in "Modernising powers, deterrents and safeguards."



Its example of how it might use the power proposed adds that the "information and documents relating to the contract may need to be checked by HMRC."



As similar powers already exist, the department said it was not increasing its information reach, although it is proposing a new inspector power for all involved third parties.



A chartered accountant believes the collective result of all the changes could be an intolerable administrative burden on companies called to overturn information on their customers.



Advisers at UHY Hacker Young also believe the power paves the way for HMRC to build "a database of unprecedented size and power about UK citizens and businesses."



The Financial Times added that Roy Maugham, tax partner at the firm, added this would allow HMRC to check the bank details of taxpayers against their tax return in "just a few clicks."



Elsewhere, HMRC reportedly dismissed the claims as inaccurate, yet it did say industry is "concerned about the potential impact on the business from which information is sought".



Respondents to the consultation also warned against HMRC making "excessive demands" for taxpayers' data to a business, in its bid to help it assess areas of risk compliance.



Following the feedback from industry, the department said third parties it could approach for taxpayers' details would exclude "voluntary bodies giving advice."



More positively for all taxpayers, the Revenue said it was exploring how to reduce the "harsh consequences" for taxpayers who miss a single payment.